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CANADA FX DEBT-C$ rises to 2-month high on growing signs of easing U.S. inflation

       * Canadian dollar strengthens 0.3% against greenback
    * Touches strongest level since June 10 at 1.2732
    * Price of U.S. oil rises 0.9%
    * Canadian bond yields rise across steeper curve

    TORONTO, Aug 11 (Reuters) - The Canadian dollar climbed to
its highest level in more than two months against a broadly
weaker U.S. counterpart on Thursday as oil prices rose and
investors weighed further evidence of cooling inflation in the
United States.
    The S&P 500 index        was trading at its highest level in
more than three months and the U.S. dollar        fell against a
basket of major currencies as data showed U.S. producer prices
unexpectedly fell in July, feeding hopes of smaller Federal
Reserve interest rate hikes.
    Sentiment was already upbeat after U.S. data on Wednesday
showed consumer prices rose at a slower-than-expected annual
pace last month.
    Canada is a major producer of commodities, including oil, so
the loonie tends to be sensitive to risk appetite.
    U.S. crude        prices were up 0.9% at $92.74 a barrel
after the International Energy Agency raised its oil demand
growth forecast for this year, with soaring gas prices driving
some consumers to switch to oil.
    The Canadian dollar        was trading 0.3% higher at 1.2734
per greenback, or 78.53 U.S. cents, after touching its strongest
level since June 10 at 1.2732.
    Canadian government bond yields were higher across much of a
steeper curve, with the 10-year             up 3.4 basis points
at 2.709%.

 (Reporting by Fergal Smith; Editing by Paul Simao)

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